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Friday, November 26, 2010

Market Comments for the Short Thanksgiving Week

Last week in my market comments I said the markets would look to continue down and test the daily 20 then 50 etc ect. This seems to be playing out that way. Again using the S&P herein referred to as the SPX, we have broken down through the hourly 50 SMA and sit right on the 20. These two moving averages have crossed over each other on the hourly which happen all the time but this area in the vicinity of 1189-90 has put up some resistance. One can see these things unfold on various timeframes beginning on the tic charts moving through the 5 min, 15 min, hourly, 4 hour, daily and finally the weekly in that order as meaningful trends expose themselves.

We have a failure of the 50 and the 20 on the 4 hours chart and the SPX failed the 20 SMA 10 days ago and has retested it twice from below unable to break to the upside. This is likely to send the SPX down to the daily 50 SMA currently at 1175 to test that. Now, what happens in a Moving Average Pattern such as this is a test of the 50 with a bounce then break through the MA to the downside and an on to the next target. Of course anything can happen and these MAP patterns are not written in stone, especially in markets such as this, where it is all about perception rather than true value in the first place. Look for low risk, high probability trades and as described here I have been short since the 8th of the month. I have made 3 trades in this time 2 short and one long on the bounce about a week ago. I may have missed this one, as I was waiting for a bit higher target to enter short but if it plays out well I can still enter short soon and get a piece of the failure. So, for now I look for the move to the daily 50 SMA on the S &P.

The DOW may be the leader here as it has for all practical purposes bounced off the 50 twice and can’t get back through the 20 on the upper side. The best trade and same as the SPX came Friday Nov 5th and worked out on the 8th as noted earlier. To me that was THE low risk High probability trade of the month, now things get more iffy and you just have to exercise a little more caution and maybe a reduced position size as volatility is still the order of the day.

My screen capture program is showing it’s ass and I will have to uninstall and reload it when I am willing to take the time. Until then no charts but I will edit this with charts before too long.

I will add here something I posted on another web site this past week.

"From a weekly perspective the S&P has completed a new high the first week in November. The way I count waves is a simple 1-2-3. We are in a wave 2 until it proves otherwise. A natural pattern for the SPX to follow is to come down and test 20 SMA then the 50 SMA should it fail at the 20. After that there are several levels of support but the biggie will be the 61.9 Fib retrace now around 1101.00 Failure there really leave nothing but an assault on the June low to determine what really shakes in this market. Outside that we remain in an uptrend from a weekly perspective. What do I think? ACH (anything can happen) but likely we will bounce off the 20 or 50 SMA and make new highs. When do I think this will play out. We likely will reach a low point mid January 2011 unless we make new highs before then. At that point the my wave count starts over.

I’m having to agree with Martin Armstrong in that I think for right now the low is in back in March ’09. However as a T/A guy I just can’t forget that stranger things have happened. It is after all speculation and the only thing I know is low risk, High probability trades will almost never get you in trouble provided your trading plan demands reasonable protective stops. Things which affect global markets must be watched closely for triggers of sudden violent moves. The nutjob in Korea, civil unrest all over the EU, gold and silver manipulation are all the standard ticking time bombs which could throw all rational out the window. These markets are extremely volatile and I will say it again, not for widows, orphans NOR novice or unskilled traders."